1. Home
  2. /
  3. Dubai Tax Free
  4. /
  5. Introduction to Dubai Tax...

Introduction to Dubai Tax Free Zones: What it is and How it Works

Aug 6, 2023 | Dubai Tax Free

Are you ready to propel your business to new heights? Discover the thriving Dubai tax free zones, where strategic advantages such as tax exemptions create an environment for businesses to flourish. Keep reading to learn more about it!

Dubai Tax Free Zones: An In-Depth Guide to What it is and How It Works 

Dubai, a global city renowned for its unique blend of modern architecture, luxury shopping, and rich cultural heritage, has rapidly grown into a leading business hub. One of the key factors contributing to its economic success is the Dubai tax free zones.

Established to attract foreign investment and stimulate economic growth, the Dubai tax free zones has become a hotspot for businesses worldwide. This blog will provide a comprehensive overview of the Dubai tax free zones, its history, benefits, and how it works.

History of the Dubai Tax Free Zones

The Dubai tax free zones concept originated in the late 1980s when the government of the United Arab Emirates (UAE) introduced a series of policy initiatives to diversify the economy away from oil.

A significant part of this strategy was the establishment of several tax-free zones designed to incentivise foreign businesses to invest in the region. The first such zone, Jebel Ali Free Zone (JAFZA), was launched in 1985 and marked the beginning of a new era for the emirate.

Since then, Dubai has seen a proliferation of tax-free zones catering to various industries, including the Dubai International Financial Centre (DIFC), Dubai Internet City, and Dubai Media City.

Understanding the Dubai Tax Free Zones

The Dubai tax free zones is a designated area within the emirate where companies can operate with various business incentives,, zero corporate and personal income taxes and simplified registration processes.

The UAE government has strategically positioned these zones to encourage foreign investment in key industries such as finance, technology, media, and manufacturing.

Key Benefits of the Dubai Tax Free Zones

The numerous advantages of setting up a business in a Dubai tax free zones include the following:

Tax Benefits

As the name suggests, companies in the Dubai tax free zones enjoy a tax-free environment. This means no corporate tax, personal income tax, or withholding tax on dividends or capital gains.

These benefits make the Dubai tax-free zone an attractive destination for businesses looking to optimise their tax planning.

Simplified Registration and Licensing

Dubai tax-free zones have streamlined the registration and licensing process, making it quicker and easier for businesses to set up and operate. Many zones also offer a “one-stop-shop” service, allowing companies to complete all necessary paperwork in one location.

World-Class Infrastructure

Each Dubai tax-free zone boasts state-of-the-art infrastructure tailored to the specific industry it serves. This includes high-speed internet connectivity, advanced communication systems, and modern office spaces.

Access to a Skilled Workforce

The Dubai tax-free zone attracts professionals worldwide, providing businesses with a diverse and highly skilled workforce.

Setting Up a Business in the Dubai Tax-Free Zone

Establishing a company in the Dubai tax-free zone involves several steps, including:

Selecting the Appropriate Zone

Businesses must first identify the tax-free zone that best aligns with their industry and requirements.

Choosing the Legal Structure

Companies must decide on the most suitable legal structure for their business, such as a Free Zone Establishment (FZE), Free Zone Company (FZC), or a Branch Office.

Preparing Documentation

Applicants must prepare the necessary documentation, such as a business plan, passport copies of shareholders and directors, and proof of address.

Obtaining Licenses and Permits

Depending on the nature of the business, companies may need to secure various licenses and permits, such as a trade license, service license, or industrial license.

Opening a Corporate Bank Account

After receiving the necessary licenses, businesses should open a corporate bank account with a local or international bank in the UAE.

Setting Up the Office

Finally, companies must establish a physical presence within the Dubai tax-free zone by leasing or purchasing office space.

Challenges and Considerations in the Dubai Tax-Free Zone

While the Dubai tax-free zone offers numerous benefits, there are some challenges and considerations for businesses to keep in mind:

Restrictions on Business Activities

Companies operating in the Dubai tax-free zone must adhere to the specific business activities permitted within their chosen zone. For instance, a company in Dubai Internet City needs to refrain from engaging in manufacturing activities.

Limited Market Access

Businesses established in the Dubai tax-free zone can freely trade within the zone and with international markets, but they may face restrictions when dealing with the local UAE market. 

Companies seeking to access the broader UAE market may need to establish a local presence outside the tax-free zone or work with a local distributor.

Cost of Living

While the Dubai tax-free zone offers tax advantages, the cost of living in the city can be high. Companies should factor in housing, transportation, and other living expenses when considering relocation.


The Dubai tax-free zone has played a significant role in transforming the emirate into a global business hub. However, it is essential to carefully consider the challenges and requirements of setting up a business in the Dubai tax-free zone.

Check out Sterlinx Global for further tax advice for your business.

Frequently Asked Questions

How can I enter a tax-free zone in Dubai?

To enter a Dubai tax-free zone, you must follow proper procedures for setting up a business, including researching the suitable free zone, selecting the appropriate legal structure, preparing necessary documentation, and applying for relevant licenses and permits.

Consulting with a professional business advisor is highly recommended to ensure regulation compliance.

How much does a free zone cost in Dubai? 

The cost of setting up a business in a Dubai-free zone ranges from AED 15,000 to AED 50,000 or more.

Keep in mind that ongoing fees such as annual license renewals, office rents, and visa fees for employees should also be considered when estimating the total cost of operating in a Dubai tax-free zone.

Can I set up a virtual office in a Dubai tax-free zone?

Some Dubai tax-free zones allow businesses to establish virtual offices, offering services such as a registered address, telephone answering, and mail handling.

However, this option may not be available in all zones, and verifying the regulations specific to the chosen zone is crucial.

Related posts:

How to Save on Tax in the UK by Having an Offshore Business

Top 10 Free Accounting Software With VAT Tax

A Quick Guide to the UK Corporate Tax System

Hire Us for Accounting?

Why not save time and hire us to do your books in the UK or globally?

Share This